We’ve been talking for years about the concept of personal car sharing, which allows a car owner whose vehicle sits idle most of the time to rent it out to someone who needs to run errands on four wheels. (As we’ve described it before, think of it as plugging your car into the Zipcar network when you’re not using it.) It’s an entrepreneurial idea with lots of benefits—reducing pollution and traffic, saving people money, boosting the economy and reducing the need for so many individuals to buy and own cars that aren’t being used efficiently.
But there’s been a big stumbling block: insurance policies.
Fortunately, California has designed legislation to remove insurance barriers that can discourage people from joining fledgling personal car sharing networks such as Spride or Relay Rides. And similar remedies are ripe to be introduced in states and provinces across the Northwest. Here’s an update on Oregon.
I talked with folks in the Oregon Insurance Division and learned that Oregon drivers face the same dilemma as California ones. In the event of an accident, the insurance policy covering the offending vehicle (and not the driver) is primarily responsible for damages. So say I make my car available to a personal car sharing network during the weekdays while I’m at my office. Someone in my neighborhood who doesn’t own a car rents it one day to take his kids to pick blueberries at a local farm. He’s so busy eating delicious berries on the way home that he doesn’t see the brake lights in front of him and rear ends a truck. Under current law, my insurance would be liable for damages to my car and the truck. That’s a scary scenario for me and the guy who sells me insurance.
Even more problematic are the underwriting guidelines that insurers follow to manage those risks. If I were to rent out my car through a sharing program, my insurance company might try to reclassify it as a commercial vehicle. That would increase my rates and make the whole enterprise less attractive. In Oregon and elsewhere, personal car insurance policies may have exclusions under which the company can deny coverage, such as “operation of a vehicle while it is used as a public or livery conveyance” or a “business use.” That means my insurance company might refuse to reimburse me if my car was damaged while I was sharing it.
How can we maneuver around these roadblocks?
- Clarifies that a vehicle owner and his or her insurance company will not be responsible for damages incurred while the car is used in a sharing program.
- Prevents insurers from rating a vehicle as “commercial” for “for-hire” solely based on its use in a personal car sharing program, provided that the revenue such use generates does not exceed expenses of maintaining the vehicle (loan payments, insurance, parking, depreciation, repairs, fuel, etc).
- Requires the personal car sharing organization to maintain electronic records and adequate insurance for instances when the vehicle is driven by a car-sharing member other than the owner.
- Prohibits an insurance company from canceling, rescinding, terminating, voiding or non-renewing an owner’s policy due to the owner making the vehicle available to a personal car sharing program.
If Oregon legislators want to follow California’s lead, or improve upon it, they can develop legislation that explicitly prevents insurance companies from increasing rates or dropping customers because of their participation in a personal car sharing program. In exchange, it also needs to guarantee that car owners and their insurers won’t be liable in the case of an accident while someone else is driving.
In California – at least so far – the assurances in AB1871 have been strong enough to satisfy the insurance industry and win unanimous votes of support in the California Assembly (75-0) and the California Senate Banking, Finance and Insurance committee (10-0). So with virtually no one opposing the idea, why not test drive it elsewhere, starting in Oregon?